CME and CFTC Charge Unregistered Hedge Fund with Spec Limit Violations
The Chicago Mercantile Exchange (CME) and Commodity Futures Trading Commission (CFTC) issued an Order filing and settling charges against an unregistered Hong Kong-based hedge fund, Elephas Investment Management Ltd. (Elephas), for violating speculative limits in wheat contracts.
Regulation 150.2 sets speculative position limits that any person may hold or control for CBOT SRW futures contracts, among other agricultural futures contracts, including limits for the number of contracts for the spot month, any single month and all months of trading. Under Regulation 150.2, the spot month position limit for SRW futures is 600 contracts. According to the agencies, as of November 29, 2017, Elephas held a net long position in the Chicago Board of Trade’s December 2017 soft red winter wheat futures contract of more than 1,000 contracts over the spot month speculative position limit established by the CFTC.
By exceeding the position limit and liquidating its overage through the delivery process, Elephas reduced its loss on its December Wheat position by $166,590. In accordance with the settlement offers, Elephas agreed to pay a fine of $50,000 and to pay the $166,590 benefit it received in reduced losses to the CME and $160,000 in a civil monetary penalty to the CFTC.
These actions are an important reminder to both registered and unregistered entities that speculative limits apply to all market participants and to ensure compliance with the market rules.
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